A Switch For Dell's BusinessA Switch For Dell's Business

Dell Computer plans to begin selling LAN workgroup switches to small- and medium-sized business customers. The product line, expected by the fall, is a new business for Dell that will supplement its $32.6 billion in annual sales, mainly of PCs, notebook computers, and servers.

Dell will launch the PowerConnect workgroup switches by October, focusing on direct sales to U.S.-based companies with up to 400 employees. Delta Networks Inc., a Taiwan company that Dell has partnered with in a joint manufacturing agreement, will make the switches.

Through Dell's software and peripherals business, Dell already sells some LAN workgroup switches manufactured by other networking vendors such as 3Com Corp. and Intel. However, its new direct sales of the PowerConnect switches are likely to supplant most of those sales, analysts say.

"Dell should be able to drive volume and gain market share based on price," says Brooks Gray, senior analyst with research firm Technology Business Research. For Dell, little risk is involved in its new venture; the deal with Delta Networks means that Dell won't have to hold any inventory of its own and won't be burdened by research and development costs, Gray says.

The market that Dell's going after is for LAN workgroup switches that cost between $40 and $3,500. Most of its volume should come from switches selling in the $50 to $400 range, where it can compete mainly on price against other low-cost switch vendors such as Allied Telesyn International and Netgear, according to Gray. But because of its direct sales model, he says, "Dell with a superior cost structure can go in and play very aggressively [on price] and still stay profitable."

Dell says it won't reveal details about specific models, features, or prices until the switches are available.